Wednesday, February 6, 2013

Funny Money Roundup 5: Cashlessness

A coming cashless or “cash-lite” world—that is, one in which
cash is supplemented, if not replaced, by a variety of ostensibly “less
tangible” modes of payment—has become the object of much discussion and
imagination (and not a little romance) over the past several years. The
imagination of a cashless world is powerfully animated by the familiar
narrative of money’s progressive abstract. IEEE’s Spectrum’s report on “The Last Days of Cash,” for instance, reiterates that story of money’s emergence
as a solution for barter (an origin story contested by many, including
anthropologist David Graeber) and evolution from more tangible to “more
abstract, virtual, and digital”; James Suroweicki documents how “we
learned to stop worrying and embrace the abstraction.” But today’s discourse
around cashlessness is not simply a restatement of this story. In this Funny
Money Roundup, we explore some of the key recent developments in the
cashlessness imaginary. In Part 2, we will showcase links from our archive that
highlight the many uses and entailments of material cash and coin.

A
Cashless World is an Economically Inclusive World

The discourse that has done the most to frame cashlessness
as an object of concern is undoubtedly that which highlights the limitations of
cash and ties cashlessness to poverty alleviation and financial (and economic)
inclusion. Actors in development and philanthropic sectors have weighed in on
the possibilities of strategies oriented towards lessening the prevalence of
and the need to use cash. USAID, for instance, announced in February 2012
an initiative to “do better than cash,” highlighting some of the limitations of
cash-heavy economies around the world: the costs of paying salaries, conducting
commerce, saving, transporting, and tracking cash. The USAID call echoes the
proposals of those like the Global Assets Project, a part of the New
America Foundation, which argued that linking conditional cash transfer
projects to savings accounts to ensure electronic delivery “could accelerate economic inclusion.” Indeed, in April 2011, a conference on mobile money
held at Tufts University’s Fletcher School was entitled “Killing Cash”
and asked, in part, “Is cash the enemy of the poor?”

The Financial Services for the Poor group of the Bill and
Melinda Gates Foundation followed the USAID announcement in July 2012 by declaring
a similar shift, suggesting in their “Strategy Overview” (pdf) that

one of the reasons that it is too
costly to serve poor people with affordable financial services is because most
poor households conduct most or all of their financial transactions in cash.
This perpetuates the poor’s marginalization from the formal economy because
banks, insurance companies, utility companies, and other institutions pay high
costs to store, transport and process cash. We also found that the best way to reduce
the cost of reaching poor people with financial services is to help shift the
majority of their cash-based financial transactions into digital form through
mobile phones or another digital interface.

This focus on the risks and “transaction costs” of using
cash is a common approach. Vishnu Sridharan suggested in Foreign Policy that one way new head of
the World Bank Jim Yong Kim can global poverty and inequality is by “get[ting]
rid of money” and emphasizing electronic transfers.

In September, USAID, the Gates Foundation, and several other
large players in the payments industry and development world—including Citi,
the Ford Foundation, Omidyar Network, VISA, and the UN Capital Development
Fund—announced the formation of a “Better Than Cash Alliance,” which
has as its mission to encourage the shift from cash to electronic or digital
payments and provide “policy,
technical and financial assistance to identify and implement the most effective
approach for local market conditions” to realize that shift. See, in
particular, this video, made by the Better Than Cash Alliance, which
introduces the provision of mobile or electronic financial services as one
approach to addressing the problems of cash and simultaneously “empowering
people and growing emerging economies.”

In February of last year, buzz began to circulate about a
book by the journalist David Wolman, The End of Money: Counterfeiters, Preachers, Techies, Dreamers—and the Coming Cashless Society. Wolman’s book chronicles his experience living
without cash for a calendar year and the efforts of people and projects around
the globe to investigate and create the technologies and institutions necessary
for a world without cash, in which all transactions can be made using
electronic payments—and in the process, presenting cashlessness as both
desirable and, to a certain degree, inevitable. In interviews and book reviews,
Wolman’s argument about and for a world without cash made the internet rounds.
Cash, these posts suggest, is “an antiquated concept” and “ridiculous,”
its continued use upheld by “magical thinking” and the “shared
hallucination” that is our trust in its value. Wolman’s book—and the interview
with him at Gizmodo—offers a useful and less technical summary of the argument
for cashlessness: Cash has many unaccounted-for costs
associated with crime and security, replacement of physical bills and coins,
transportation, infrastructure, and so on. Most of these costs are products of
cash’s unavoidable materiality.

A
Cashless World is Coming: Reports, Examples, Histories

Alongside the surge of interest from the philanthropic and
development communities about the potential for cashlessness to ameliorate the
quality of life for poor people around the world, we have seen a series of
reports about experiments in cashlessness. Collectively they suggest that the
movement towards cashlessness has already begun. One news report, citing
studies measuring the limited role of bills and coins in the Swedish economy
(3%, well below averages for the eurozone and the US), suggests that in Sweden,
the first country in Europe to introduce bank notes (in 1661), cash is already
an artifact of that past era (h/t Lana). Many of the concerns are familiar,
security and crime foremost among them. The former deputy governor of the
Swedish central bank predicted that cash may not disappear, but will survive
“like the crocodile, even though it may be forced to see its habitat gradually
cut back.”

Others have pointed to Canada as a model for the development
of a cashless society; one article highlights the national public debit
system Interac. And in April, reportssurfaced (also: here)
that the Royal Canadian Mint would roll out a new digital payment vehicle—MintChip,
designed to facilitate small-denomination transactions or micropayments—and
hold a contest for software developers to submit their ideas and
applications for using the new currency. This only days after announcing
the process of phasing out the use of the Canadian penny, and in the midst of
creating slick new $50 and $100 bills made out of plastic. Winners
of the MintChip Challenge were announced in September, and they include
applications that donate cents automatically with every MintChip transaction; make
easy simultaneous payments by multiple patrons at restaurants; and, the grand
prize winner, allow P2P transactions of virtual value. The application, called MintWallet,
utilizes a peer-to-peer network hosted on a cloud to facilitate mobile
payments:

MintWallet
enables you to pay for your latest acquisition on Craigslist, sell your old CD
collection in a garage sale or collect donations for charity. Creating a money
request is as simple as filling in a few fields. The money request is sent to
all of the participants that you choose. […] To send money is as simple as
selecting a payee, entering the amount and adding a reference. When sending
money in reply to a money request the fields are automatically filled in for
you. Once a payment is successfully generated from your MintChip, it will be
locally stored. Even on unreliable network connections no money is lost. The
payment can be sent over the air or it can be scanned from one device to
another via an automatically generated QR code. MintWallet provides a rich
platform that enables inventive scenarios. […] Handling cash has never been
this easy!

The discourse of the MintChip challenge is explicitly
evolutionary: The shift to digital currencies is framed as the most recent in a
long line of evolutions in the form of money. (It’s tagline is “the evolution
of currency,” and the MintChip homepage has front and center an awesome linear
chart connecting, with arrows, what looks to be a goat, to wheat, to silver
coins, to gold bars, to bills, to a memory chip emblazoned with the MintChip
logo. It also appears in this amazing promotional video before
dissolving into a screen full of moving numbers.) Interestingly, however: the
prize for the winners? Gold! (“Wafers” and “Maple Leaf Coins”) (Oh, and
if that wasn’t juicy enough, David Wolman was scheduled to speak at the award ceremony.)

Many stories about cashlessness fall into two categories.
There are those—such as this New York Times article about the slowing of
the US Treasury’s printing presses (although it also reports that cash is still
“the best available
technology for paying baby sitters and tipping bellhops” and for small
businesses and criminals, and that $100 bills in particular are hoarded as
stores of value around the world)—that report on the decline of cash as a trend
already underway. See also this report from Rasmussen (h/t Lana), which
declares that 43% of US adults have gone a week without paying for anything
with cash. Other stories, however, are exposé-style portraits of individuals
who, like Wolman, have decided to go without cash. The story of Daniel Suelo,
who “quit money” and lives in a cave in Utah, while describing his life on his
website “Living without Money.” Suelo’s story was turned into a book
(The Man Who Quit Money) and a BBC report (h/t Stevie). At Slate, Seth Stevenson documented his
endeavor to live without cash (reporting some of the difficulties and
investigating imperative questions like how to visit a strip club without cash and how the illicit economy might work cashlessly).

Other online forums have popped up exploring the
possibilities—and limits—of cashlessness. Pymnts.com hosts a collection
of articles and reports about developments in the discourse on cashlessness,
but one which also highlights some of the ways in which cash remains the most
prevalent medium of exchange and mode of payment. BlackRock implores investors
to “rethink the cost of cash” as a component of investment portfolios,
indicating that cash is “probably the most conservative option” (h/t Lana). The
Webisteme blog posted notes from the “Digital Money Unconference” in September
2012, which includes historical comparisons to the mid-17th century,
a presentation by David Wolman, and sessions on Bitcoin, catastrophic events,
and paths to the creation of a cashless society.

Others have offered criticism of the discourse around
cashlessness. A columnist for the Washington Post highlighted some of
the drawbacks of cashlessness in a response to Wolman’s book. Gizmodo pointed out the continuing popularity of the one-hundred dollar bill as a store of
value around the world. Felix Salmon argues that cashless payment makes
it too easy to spend money, especially for those who live on limited means. And
this article from Naoki Wakamori and Angelika Welte uses shopping
diaries to investigate why cash remains the dominant payment for small-value
transactions.

Finally, it’s important to acknowledge the history that
undergirds the current surge of interest in cashlessness. Dave Birch from
Consult Hyperion, while suggesting (with Barclays Bank) that cash is both
costly and “tedious,” provides some background to the current discourse.
Chris Skinner from the Financial Services Club Blog looks at the snapshots from the history of advertisements for point-of-sale technology, from the
cash tills and registers of the early 20th century to the advertising
campaign of Square. The images he posts of early print ads for cash machines
are brilliant. At Bloomberg’s excellent Echoes blog, Bernardo Bátiz-Lazo, Thomas Haigh, andDavid Stearns provide
an important outline of the history of “visions of a cashless society,” beginning
in the mid-20th century. And finally, Stearns and Bátiz-Lazo have organized an online web archive, the Cashless Society Project, to provide a correction to the “historical myopia” that characterizes
much popular reporting on cashlesness. Two of their working papers (“How
the Future Shaped the Past” and Matthew Hollow’s “Pre-1900
Utopian Visions of the ‘Cashless Society’”) offer historically nuanced
explorations of the roots of cashlessness.

1 comment:

I believe I have seen many of your Flickr photos and have even used a few on my website, Pictures of Money.

I think it would be detrimental to cultural diversity if tangible banknots were taken out of circulation. I've always been fascinated by the art on foreign currency. United States banknotes are boring by comparison. My favorite are the Malaysian bills with the pictures of turtles and birds.

I know we live in a quickly-changing world and time is of the essence, but I hope for principle's sake that this "cashless society" does not come to fruition.